By: Yadira Portalatín-Méndez, CPA, Esq. & Yaritza Portalatín-Méndez, CPA, Esq.

Act Number 257 of December 10, 2018 (Act 257) amended the Puerto Rico Internal Revenue Code of 2011 (Code) and some Sales and Use tax (SUT) provisions were modified.  An important SUT amendment applies as of October 1, 2019 to prepared foods, carbonated beverages, pastry products, and candy, sold by restaurants (including food trucks) that obtain the corresponding authorization and certification from the Secretary of Treasury, which will be subject to a reduced 7% SUT. 

Administrative Determination 19-03, issued by the Department of Treasury on August 2, 2019, establishes the guidelines to qualify for the reduced SUT rate and establishes the process to obtain the required certification.

Eligibility Requirements

Merchants that comply with the following will be eligible to obtain the certification:

• A locality in which its merchant certificate has certain codes of the North American Industry Classification System (NAICS).
• In compliance with all the SUT monthly returns and declarations.
• No debts with the Department of Treasury (if the merchant has debts it must be subject to a payment plan).
• Fiscal terminal in its localities (adequately connected to a certified processor which transfers the required information).

Application Process

On September 23, 2019, those merchants that comply with the applicable requirements, will have available through the corresponding SURI account the certification (SC 2995 – Certificate of Authorized Business – Reduce Rate on Prepared Foods) for each locality that qualifies for the reduced rate.  The certification must be displayed in the entrance of the business location and it will be effective until September 30, 2020.  However, the merchants that continue in compliance with the applicable requirements will be annually automatically issued the corresponding certificate.

Merchants that have merchant registrations with the NAICS codes that qualify for the reduced rate and do not receive the certification will receive a communication indicating the reason it did not comply with all the requirements.  Once the merchant complies with the requirements, as of September 24, 2019, it may request the certification through SURI as per the process established on Determination Letter 19-03.

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This publication is a summary of recent legislation referred to herein and is not intended to substitute legal advice.  We encourage you to contact us or your tax advisor if you have any questions or need assistance regarding any of the matters presented herein.  An attorney-client relationship with Pellot-González, P.S.C. cannot be formed by reading or responding to this memorandum.  Such a relationship may be formed only by express agreement with Pellot-González, P.S.C.